No budget yet, but some details slipping out

Republican lawmakers hoped to have a budget plan approved by March 4, but were apparently unable to cobble together the support needed to paper over $3.4 billion in deficit.

In anticipation of increased focus on the budget, legislative committee hearings were canceled in the first week of March. Early in the week, GOP leaders began briefing caucus members on a nearly complete proposal that had been crafted behind closed doors with the Governor’s Office.

But at the end of the week, they still hadn’t formally released the budget plan, and a special session to consider the budget bills had not been called.

Details, however, began to emerge March 3 when leaked documents outlined the agreement between Republican leaders and Brewer. They show the framework of a plan that would erase nearly $660 million of red ink in fiscal 2010 and about $2.7 billion in fiscal 2011.

The fiscal 2010 deficit would be fixed mostly with accounting gimmicks. Although it would cut $122 million from state spending, it calls for deferring $450 million in payments to public schools and universities until the start of fiscal 2011.

The proposal is aimed at cutting more than $1.1 billion in fiscal 2011, with the state’s health care program and K-12 education bearing the brunt.

The most controversial cut would be trimming $385 million from AHCCCS by rolling back the eligibility requirements to where they were before 2000, when voters approved increasing them to the federal poverty level.

The change wouldn’t take effect until January because the state will be using federal stimulus money to pay health care costs through the end of 2010, and rules associated with that funding prevent the state from lowing eligibility levels.

Although Brewer proposed asking voters to decrease the eligibility, lawmakers now believe they can do so without voter approval. But doing so may invite a lawsuit, as the 2000 ballot measure is widely believed to be subject to a voter-protection provision of the state Constitution, which prevents lawmakers from undoing programs and laws approved by voters.

Another $385 million would be carved from K-12 education. Eliminating full-day kindergarten classes would save $218 million. A cut of $93 million would be backfilled by federal stimulus money.

The budget proposal also would shutter the Arizona Department of Juvenile Corrections, put counties in charge of incarcerating juveniles and shift some of the cost to municipalities. The agency wouldn’t be shut down until October 1, but the state would take $22 million from sales tax revenue shared with cities and give it to counties to offset some of the cost.

The plan calls for $989 million in new revenues, of which $918 million would come from a proposed 1-cent temporary sales tax that will go before voters in a May 18 special election.

Voters must approve other components of the budget proposal, too. The plan calls for two November ballot items. One would allow lawmakers to raid the Growing Smarter fund, which was created by voters in 1998 to preserve open space, and shift $124 million to the state’s general fund.

The other would move $325 million from the First Things First fund to the general fund. Voters approved that measure, which included an 80- cent-per-pack tobacco tax, in 2006. Last year, lawmakers tried to take the money, but the Arizona Supreme Court said they couldn’t do so without permission from voters.

Although GOP leaders have said they intend to include a contingency plan in the budget to trigger additional cuts if voters reject the sales tax increase in May, details on those cuts were not included in the document obtained by the Arizona Capitol Times.

Several Republicans close to the budget negotiations said they were still trying to hammer out a deal with Brewer on how to apply cuts to state programs if the tax increase is not approved.

The Governor’s Office initially sought to focus all of the cuts on education and public safety, which would mirror where the new sales tax revenue would be directed, but lawmakers refused to go along.
Rep. John Kavanagh, who chairs the House Appropriations Committee, said Brewer’s plan to isolate the spending cuts in the contingency plan was a non-starter.

“That’s not going to happen. The sales tax may actually fail, and then we’d have to live with a good political policy but a poor public policy,” he said.

Sources with knowledge of the negotiations, but not authorized to speak publicly about them, said Brewer had asked for $650 million in cuts to K-12 education and universities, plus a $270 million reduction in the income tax revenue the state shares with cities and towns.

That would take about 57 percent of the $474 million cities expect to receive next year.

Instead, the sources say the contingency portion of the budget will apply the cuts more broadly to state government, though it is not clear if lawmakers had reached an agreement on those reductions.
Gubernatorial spokesman Paul Senseman said the notion of merely cutting a percentage of an agencies funding will not adequately let voters know what would happen if the sales tax fails and won’t meet Brewer’s approval.

“It’s got to be something with details (on cuts) so citizens know,” he said. “A percentage or a number is a concept. It’s something you could do on the back of a napkin. It’s not a real budget.”